Endless River Techs. v. Trans Union LLC
| Docket Number | 1:18-CV-00936 |
| Decision Date | 02 February 2022 |
| Parties | ENDLESS RIVER TECHNOLOGIES LLC, Plaintiff, v. TRANS UNION LLC, Defendant. |
| Court | U.S. District Court — Northern District of Ohio |
This matter is before the Court on the Motion for Partial Summary Judgment of Defendant, Trans Union LLC ("Trans Union" or "Defendant") (ECF #84, #85), the Motion for Partial Summary Judgment of Plaintiff, Endless River Technologies LLC ("Endless River" or "Plaintiff) (ECF #87, #88), and Defendant's Amended Motion for Partial Summary Judgment. (ECF #117 #118).[1] Also before the Court are Defendant's Motions to Strike the May 24, 2021 and June 25, 2021 Declarations of Richard Bonitz. (ECF #91, #92; #126, #127).
I. SUMMARY OF FACTS [2]
Endless River brings this suit alleging that Trans Union used its influence and market power to convert and misappropriate ERT's intellectual property, disparage its reputation and tortiously interfere with prospective business partnerships. (ECF #87). The underlying dispute stems from the alleged breach of an agreement made in 2014 between Endless River and Trans Union to collaborate on the development and commercialization of the "Quote Exchange," a novel method for insurers to provide competitive pricing to consumers online. (Id.).
Endless River argues the agreed upon terms are clear: the Quote Exchange intellectual property was to remain in ERT's ownership unless and until Trans Union elected to buy out Endless River at the project's completion, and if TU chose to terminate its involvement prior to the end of 2018 Plaintiff would maintain ownership of the QE source code and repay TU for development costs as specified by the terms. (ECF #97).
Endless River is a small consulting firm that provides business development, technical operations support, and project services related to software development of products in the e-commerce space. (ECF #114, f 15). Endless River was formed in 2009 by Richard Bonitz, a former Insurance.com executive, who sought to develop an idea he had to "streamline comparative insurance price-quoting online," and collaborated with two former colleagues, Phil Wintering and Ron Somich, to pursue his idea. (ECF #97; 5/27/2021 Decl. of R. Bonitz ECF #87-1).
After internal development, ERT began presenting the concept of an online insurance-lead marketplace to larger companies, a concept which eventually became the Quote Exchange Program (the "QE Program" or "QE"), a platform designed to provide potential customers with comparative quotes for insurance and financial services products, including auto insurance, from a number of different carriers. (ECF #114, 119). In January 2013, Endless River pitched the QE Program to Mr. Geoff Hakel, then Group Vice President of Trans Union's insurance division. (G. Hakel Dep., pp. 24:7-17). Mr. Hakel expressed interest in the project, and the parties spent several months negotiating an agreement to develop and commercialize the QE. (Hakel Dep., pp. 26:12-20; 94:3-12).
On March 31, 2014, Endless River and Trans Union executed a Development Agreement and Contract for Services (the "Agreement") pursuant to which the parties would develop the QE Program. (ECF #113-1). Under the terms, TU would be responsible for funding development of the source code for the platform and ERT would provide business development services, technical operations support, and technical project services. In exchange, TU agreed to pay ERT $300, 000 per year, which later increased to $450, 000 per year. (Id.).
Section 2 of the Agreement, "Terms of Contract," provides:
The Period of Performance of this Contract shall be from January 1, 2014 to December 31, 2018, inclusive. The foregoing notwithstanding, TU shall have the right to terminate this Contract at any time upon 180 days prior written notice to Provider. TU's obligation to pay consulting fees shall survive during the notice period. In the event of termination of this Agreement, intellectual property rights to the Quote Exchange concept/platform shall revert to ERT as outlined in Exhibit A. (Id. at 12).
Exhibit A of the Agreement outlines the parties' five phases of development for the QE Program and defines obligations regarding Work Product[3] and Intellectual Property[4] during the various stages, culminating in Phase V, where: "[Endless River] agrees to transfer all intellectual property and application rights to [Trans Union] at the conclusion of the buyout schedule set forth herein." .
The parties completed Phase I, the Initial Business Development/Due Diligence, from August 1, 2013 through January 31, 2014, and Phase II, which governed continued business development through 2018, during which time ERT would be compensated an annual flat consulting fee. Product Build, or Phase III, was triggered upon commitment from four insurance carriers executing letters of intent to participate in the QE Program build. During Phase III, the parties would continue to market the QE to insurance carriers while completing the build of the platform. (Id., Ex. A, Phase III).
Phase III addresses ownership of the Quote Exchange upon termination of the Agreement, providing:
Also, during Phase III and through 2018, should TU choose to terminate the Contract and should ERT continue to market and monetize the TU developed code, repayment of TU incurred development fees shall be paid to TU from future ERT revenues generated over a time period not to exceed 36 months. In this instance, the Quote Exchange platform source code developed hereunder will revert to ERT ownership.
(Id., Ex. A, Phase III, emphasis added).
Phase IV governed Product Launch, during which time ERT would continue to assist with business development and serve in an account management role to assist with attracting insurance carriers to the platform. After the QE achieved cumulative net profitability, the terms specified TU would receive 60% of revenue and ERT would receive 40% net of direct expenses contributed by the parties. (Id., Ex. A, Phase IV).
Phase V, titled Full Transition to TU, was contingent on achieving cumulative profits, requiring the QE Program reach profits in excess of $3 million. If this figure was achieved, the Agreement allowed for TU to purchase ERT's interest in the QE over a five-year-period, during which time ERT would transfer ownership to TU in increments of 20% ownership interest in a subsidiary company formed for the purpose of the buyout. (Id., Ex. A., Part V).
At the end of this transfer, if applicable, Phase V provides: "TU will assume all intellectual property and application rights in the Quote Exchange. In the event that TU abandons or substantially curtails operations of the Quote Exchange prior to the conclusion of Phase V, all intellectual property and application rights shall revert to ERT. (Id.).[5]
After executing the Agreement, the parties obtained the requisite letters of intent from insurers and moved forward with QE Program development.[6] During this time, Endless River alleges difficulties with Defendant's management style, and Trans Union cites technical difficulties and challenges engaging selling and quoting carriers in order to ensure a competitive marketplace. Despite these challenges, Endless River and Trans Union launched the Quote Exchange in the Florida market in May 2016.[7]
In September 2017, Trans Union raised concerns regarding the QE's under performance of original revenue projections, and on October 4, 2017, Defendant elected to terminate the Agreement by formal letter, citing unmet project expectations. (ECF #97, Ex. 19).[8] In its formal communication, TU asked ERT to sign a termination agreement, which Plaintiff declined.[9]
At this juncture, the parties' dispute regarding QE ownership took form; ERT alleges Trans Union prohibited Plaintiffs access to the QE contained on TU's laptops and subsequent, alleged misrepresentations made by TU to third-parties regarding the QE precipitated the filing of this lawsuit. Endless River contends that while in discussions with TU regarding conditions for the return of laptops, Defendant disabled access and its "unilateral revocation prevented Endless River from being able to "tap into [Endless River] materials...as the accounts [we]re disabled..." (ECF #97, Ex. 2). Endless River argues it demanded immediate access to the QE Program and source code so it could continue to bring the product to market. ERT alleges TU refused to provide access or copies of the QE Work Product and has not returned or otherwise made the Work Product available to date. .[10]
After receiving Trans Union's notice of termination, Endless River alleges that it began contacting third-parties with "strategic market knowledge and ability to commercialize the program and keep Quote Exchange going," including LeadCloud and ITC. (ECF #97, Ex. 3; Ex. 27; Ex. 28). ERT claims both LeadCloud and ITC expressed interest in working with Plaintiff on the QE, and Endless River approached TU, advising of its intent to continue work on the QE, and inquired if the parties could draft a joint statement notifying carriers, a request Defendant denied. (ECF #97, Ex. 2-B; Ex. 7; Ex. 4).
Endless River alleges that Trans Union, unbeknownst to Plaintiff, communicated to prospective carrier-recipients:
.. .that Trans Union was shutting down the Quote Exchange, that it apparently had the unilateral right to do so, that Quote Exchange was Trans Union's innovation, and that Trans Union was committed to continuing to develop...
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